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💼 What's Missing?
briefcase | invest smarter | issue #56
🎂 A big happy birthday to Nicholas Cage 🥳
The Cager only has only one birthday wish...
Speaking of blowing, Cage has been forced to take on a myriad of new movies after blowing his $150 million fortune. New titles include: National Treasure 3: The Search For Write-Offs, Leveraging Las Vegas, Broke In 60 Seconds, and of course, I Need Snake Eyes.
🏠 Middle Housing
Speaking of completely blowing it, since WWII North America has completely Nicolas Caged our housing supply by allowing only two primary types: Suburban single-family homes and high-rise buildings.
Let's play a game: What do you see in this picture of beautiful Vancouver?
✅ Condos (bottom right).
✅ Low-rise single-family homes (top left).
❌ Nothing in between.
There's certainly something missing, and all North American cities face this problem. Europe on the other hand doesn't, but we will get to that later.
What's missing is something we call the missing middle.
Missing Middle — Describes the pre-WWII type of housing that includes duplexes, triplexes, rowhomes, courtyard apartments, small multi-family, and denser types of housing that fit within a low-rise community. These housing units are compatible in scale with single-family neighbourhoods, but are multi-plexes that allow for modest densification, greater affordability, and more housing supply.
This housing type is the opposite of the car-centric single-family housing policies that have plagued North America since the 1940s.
We have a housing supply and affordability problem, and research has shown that 90% of the housing stock required to be built between now and 2040 will be missing middle housing.
Here's architect Paddy Steinschnieder on the topic of missing middle:
It accomplishes a lot of things without effort. First of all, it's the middle. So it's not an extreme, and it's missing, which makes people say, "Well, how can I get what we need?" It responds to so many of the other issues that people want to address in their communities—whether it's walkability, or the density to support different forms of transportation and retail businesses in a downtown. We can have excellent form-based codes that talk about great architecture and design, but it's the feet on the street that's going to make the downtown work and reweave the former urban fabric.
Missing middle stops the urban sprawl that began in the 1940s. The single-family home catering to the nuclear family in the suburbs is slowly coming into focus as we look at the underlying reasons for our housing supply, affordability, and climate problems. For the latter, suburbs = lots of grass to water and commutes.
The problem with current city planning is we aren't encouraging enough missing middle housing through upzoning, densification (well done California!), or construction.
A recent report from the National Association of Homebuilders (NAHB) shows that "the multifamily segment of the missing middle (apartments in 2 to 4 unit properties) has shown weakness" over the past few years.
As a share of all multifamily, 2-4 unit construction is only 1.6% of the total. By comparison, from 2000 to 2010, missing middle home construction up about 11% of total multifamily construction.
Why are we not building more missing middle housing? Because affordable and ample housing has been made illegal by governments across North America. Read more here, but know that single-family zoning is terrible for housing supply and affordability.
The VAST majority of what is legal to build is limited to single-family homes, and building anything else requires costly rezoning processes and ongoing fights with NIMBYs.
Source: Not Just Bikes
This, in turn, makes building walkable neighborhoods with different housing types almost impossible in North America.
The situation in Europe is very different, where you will find mixed housing types including courtyard apartments, 2-4 apartments in a single property, and smaller mid-rise multi-family units all in the same neighborhood.
This creates walkability, affordability, and increases supply. It also improves overall health as it encourages walking over driving, as well as social interaction in denser neighborhoods.
It's this...
...Versus this...
Imagine if all those small European apartments were only allowed to be single-family homes, how much housing supply would be lost?
Maybe, it's no surprise then that Europeans are generally happier than Americans. We need to inject a lot more missing middle into our city planning. Or else.
So What? The big house, big yard, big commute mentality is on the decline. 90% of homes over the next 20 years will need to be missing middle to keep up with demand. Investors, developers, and entrepreneurs who double down on this space are sure to win in the long-term.
Interested in learning more? On January 25th, Karen Parolek of Opticos Design will host a live webinar titled Missing Middle Housing. Check it out!
TLDR: Top Stories
📈 Mortgage rates hit 9-month high, and loan demand drops further — CNBC
🚗 The suburbs are still hotter than cities for homebuyers — WaPo
😕 Adam Neumann has accumulated a real estate portfolio in excess of $1B since departing WeWork — Inman
📊 29% of survey respondents say they are delaying buying a home due to inflation — Realtor
💸 ...And US median rent rose 11% in 2021 due to inflation, 3x faster than usual — Inman
Up next, on briefcase...
...We unveil our Terms & Conditions written entirely in emojis.
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Written By Brad Cartier
